India’s GARP Investing Edge: Overcome Valuation Hurdles
February 29, 2024
Read Time 3 MIN
With India on track to become the world’s third-largest economy with a projected GDP of $5T by 20271, this emerging economic powerhouse has been stealing the investment spotlight—and with good reason. Its stock market has consistently outperformed major benchmarks over the past two decades, and its $4.33T market capitalization has already surpassed Hong Kong's2 stock market, reflecting its strong economic fundamentals. Soaring valuations may be raising eyebrows, but we believe India remains an attractive investment destination among emerging markets. To manage valuation concerns, Growth at a Reasonable Price (GARP) investing offers an approach that helps investors gain exposure to India’s economic momentum while keeping a disciplined eye on valuation.
India’s 20-Year Winning Streak
Over the last 20 years, India's stock market has outperformed both the S&P 500 and the MSCI Emerging Markets Index. This outperformance is a testament to India's strong economic fundamentals, vibrant entrepreneurial ecosystem, and investor confidence in its long term growth. India’s stock market could remain attractive to global investors given the country’s strong macro-economic position relative to other emerging markets.
India’s Stock Market: A Strong Track Record of Performance
Source: Morningstar, data as of 1/31/2024.
India Valuations Near Record Highs
Despite strong stock performance and macro tailwinds, Indian equity valuations may give pause to some investors who are considering an allocation. Current valuations are rich compared to historical averages over the past 10 years.
MSCI India P/E: 12/31/2013 - 1/31/2024
Source: Factset, data as of 1/31/2024.
Even with reservations around valuations, India's investment case remains strong. The country's growth trajectory is compelling, and the geopolitical factors at play could potentially fuel another rally, especially following India's general election in May 2024.
GLIN | VanEck India Growth Leaders ETF
Sidestep Valuation Concerns Using GARP
GARP investing is all about striking the right balance. It aims to capture the upside potential of growth stocks while avoiding the pitfalls of overvaluation. GARP stocks exhibit strong earnings per share (EPS) and sales growth but are priced reasonably compared to the broader market. A GARP approach allows investors to capture growth in their portfolio while managing downside risk.
The characteristics of a GARP approach focused on Indian equities, represented by the MarketGrader India Growth Leaders Index, are shown below. GARP focuses on companies with robust growth metrics, leading to higher sales and EPS growth compared to the broader market. What sets it apart is its emphasis on value, resulting in lower valuation metrics like the price-to-earnings (P/E) ratio. This translates to a Price/Earnings to Growth (PEG) ratio that's almost half that of the broader market index. A lower PEG ratio indicates that investors are paying less for each unit of expected earnings growth.
By concentrating on GARP stocks, investors gain consistent exposure to companies that are not just growing, but are also attractively valued. As shown below, focusing on GARP stocks provides consistent exposure to more attractively valued companies versus the broad market index as measured by forward P/E.
MarketGrader India Growth Leader’s Index Characteristics
| MarketGrader India Growth Leaders Index | MSCI India Index | |
| Sales Growth | 28.1 | 22.8 |
| EPS Growth | 57.2 | 30.3 |
| PEG | 0.7 | 1.3 |
| Forward P/E | 18.0 | 22.9 |
| P/B | 4.1 | 4.3 |
| Negative Sales Growth (% of index) | 2.6 | 4.6 |
| Negative EPS Growth (% of index) | 4.7 | 19.1 |
Data as of 12/31/2023, source: Bloomberg.
Intelligent Index Construction Yields Results
The GARP approach has delivered outperformance relative to the broad market index. As of January 31, 2024 MarketGrader India Growth Leaders Index has outperformed the broad market index in trailing 1-3 years of live index performance history.
Smart Indexing Delivers Outperformance vs. Broad Market
| YTD | 1 Year | 2 Years | 3 Years | 2/21/2020 - 1/31/2024 | |
| MarketGrader Growth Leaders Index | 4.15 | 42.92 | 9.39 | 14.43 | 15.03 |
| MSCI India Index | 2.41 | 27.53 | 7.46 | 13.76 | 13.50 |
Source: Morningstar. Data as of 1/31/2024. The table and chart show live performance history of MarketGrader India Growth Leaders Index since inception of 2/21/2020 relative to the broad market index.
Access GARP Investing in India
The MarketGrader India Growth Leaders Index is an all cap index that selects fundamentally strong Indian firms with attractive growth potential at reasonable prices. VanEck India Growth Leaders ETF (GLIN) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MarketGrader India All-Cap Growth Leaders Index.
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DISCLOSURES
1 India set to be world’s third largest economy by 2027, finance ministry says.
2 India Tops Hong Kong as World’s Fourth-Largest Stock Market.
MSCI India Index is designed to measure the performance of the large and mid-cap segments of the Indian market.
S&P 500 Index consists of 500 widely held common stocks covering industrial, utility, financial and transportation sector; as an Index, it is unmanaged and is not a security in which investments can be made.
MSCI Emerging Markets Index captures large and mid cap representation across 24 Emerging Markets (EM) countries.
MarketGrader India All-Cap Growth Leaders Index consists of fundamentally sound Indian companies that exhibit attractive growth potential at a reasonable price.
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
An investment in the Fund may be subject to risks which include, but are not limited to, special risk considerations of investing in Indian issuers, foreign securities, emerging market issuers, foreign currency, depositary receipts, information technology sector, basic materials sector, health care sector, energy sector, industrials sector, micro-, small- and medium capitalization companies, cash transactions, equity securities, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversification and index-related concentration risks, all of which may adversely affect the Fund. Emerging market issuers and foreign securities may be subject to securities markets, political and economic, investment and repatriation restrictions, different rules and regulations, less publicly available financial information, foreign currency and exchange rates, operational and settlement, and corporate and securities laws risks. Micro-, small- and medium capitalization companies may be subject to elevated risks.
Index returns are not Fund returns and do not reflect any management fees or brokerage expenses. Certain indices may take into account withholding taxes. Investors can not invest directly in the Index. Returns for actual Fund investors may differ from what is shown because of differences in timing, the amount invested and fees and expenses. Index returns assume that dividends have been reinvested.VanEck India Growth Leaders ETF (GLIN) is not sponsored, endorsed, sold or promoted by MarketGrader.com Corp. (“MarketGrader”). MarketGrader's only relationship to VanEck Associates Corporation (“Licensee”) is the licensing of the MarketGrader India All-Cap Growth Leaders Index (the “Index”) which is determined, composed and calculated by MarketGrader and Solactive AG, as Index Calculation Agent, without regard to Licensee. MarketGrader has no obligation to take the needs of (Licensee) or the owners of the Fund into consideration in determining, composing or calculating the MarketGrader India All-Cap Growth Leaders Index. MARKETGRADER SHALL NOT BE A PARTY TO THE TRANSACTION CONTEMPLATED HEREBY, AND IS NOT PROVIDING ANY ADVICE, RECOMMENDATION, REPRESENTATION OR WARRANTY REGARDING THE ADVISABILITY OF THIS TRANSACTION OR THE FUND OR THE ABILITY OF THE INDEX TO TRACK INVESTMENT PERFORMANCE. MARKETGRADER HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, REGARDING THIS TRANSACTION AND ANY USE OF THE INDEX, INCLUDING BUT NOT LIMITED TO ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR USE, AND NON-INFRINGEMENT AND ALL WARRANTIES ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING AND USAGE OF TRADE OR THEIR EQUIVALENTS UNDER THE LAWS OF ANY JURISDICTION. UNDER NO CIRCUMSTANCES AND UNDER NO THEORY OF LAW, TORT, CONTRACT, STRICT LIABILITY OR OTHERWISE, SHALL MARKETGRADER OR ANY OF ITS AFFILIATES BE LIABLE TO ANY PERSON FOR ANY DAMAGES, REGARDLESS OF WHETHER THEY ARE DIRECT, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY CHARACTER, INCLUDING DAMAGES FOR TRADING LOSSES OR LOST PROFITS, OR FOR ANY CLAIM OR DEMAND BY ANY THIRD PARTY, EVEN IF MARKETGRADER KNEW OR HAD REASON TO KNOW OF THE POSSIBILITY OF SUCH DAMAGES, CLAIM OR DEMAND.
MarketGrader India All-Cap Growth Leaders Index is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using MarketGrader India All-Cap Growth Leaders Index and/or its trademark or the Index Price at any time or in any other respect. MarketGrader India All-Cap Growth Leaders Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that MarketGrader India All-Cap Growth Leaders Index is calculated correctly. Irrespective of its obligations towards MarketGrader, Solactive AG has no obligation to point out errors in MarketGrader India All-Cap Growth Leaders Index to third parties including but not limited to investors and/or financial intermediaries of the financial instrument. Neither publication of MarketGrader India All-Cap Growth Leaders Index by Solactive AG nor the licensing of MarketGrader India All-Cap Growth Leaders Index or its trademark for the purpose of use in connection with the financial instrument constitutes a recommendation by Solactive AG to invest capital in said financial instrument nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in this financial instrument.
"MARKETGRADER" and “MarketGrader India All-Cap Growth Leaders Index ” are trademarks of MarketGrader.com Corp. and have been licensed for use for certain purposes by Van Eck Associates Corporation. based on the MarketGrader India All-Cap Growth Leaders Index , is not sponsored, endorsed, sold or promoted by MarketGrader, and MarketGrader makes no representation regarding the advisability of investing in such product(s). VanEck India Growth Leaders ETF (GLIN).
MarketGrader India All-Cap Growth Leaders Index is calculated and published by Solactive AG. MarketGrader India All-Cap Growth Leaders Index is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using MarketGrader India All-Cap Growth Leaders Index or its trademark or the Index Price at any time or in any other respect.
The S&P 500 Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Van Eck Associates Corporation. Copyright © 2023 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit https://www.spglobal.com/spdji/en/. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
© Van Eck Securities Corporation, Distributor, a wholly-owned subsidiary of Van Eck Associates Corporation.
Related Funds
DISCLOSURES
1 India set to be world’s third largest economy by 2027, finance ministry says.
2 India Tops Hong Kong as World’s Fourth-Largest Stock Market.
MSCI India Index is designed to measure the performance of the large and mid-cap segments of the Indian market.
S&P 500 Index consists of 500 widely held common stocks covering industrial, utility, financial and transportation sector; as an Index, it is unmanaged and is not a security in which investments can be made.
MSCI Emerging Markets Index captures large and mid cap representation across 24 Emerging Markets (EM) countries.
MarketGrader India All-Cap Growth Leaders Index consists of fundamentally sound Indian companies that exhibit attractive growth potential at a reasonable price.
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
An investment in the Fund may be subject to risks which include, but are not limited to, special risk considerations of investing in Indian issuers, foreign securities, emerging market issuers, foreign currency, depositary receipts, information technology sector, basic materials sector, health care sector, energy sector, industrials sector, micro-, small- and medium capitalization companies, cash transactions, equity securities, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversification and index-related concentration risks, all of which may adversely affect the Fund. Emerging market issuers and foreign securities may be subject to securities markets, political and economic, investment and repatriation restrictions, different rules and regulations, less publicly available financial information, foreign currency and exchange rates, operational and settlement, and corporate and securities laws risks. Micro-, small- and medium capitalization companies may be subject to elevated risks.
Index returns are not Fund returns and do not reflect any management fees or brokerage expenses. Certain indices may take into account withholding taxes. Investors can not invest directly in the Index. Returns for actual Fund investors may differ from what is shown because of differences in timing, the amount invested and fees and expenses. Index returns assume that dividends have been reinvested.VanEck India Growth Leaders ETF (GLIN) is not sponsored, endorsed, sold or promoted by MarketGrader.com Corp. (“MarketGrader”). MarketGrader's only relationship to VanEck Associates Corporation (“Licensee”) is the licensing of the MarketGrader India All-Cap Growth Leaders Index (the “Index”) which is determined, composed and calculated by MarketGrader and Solactive AG, as Index Calculation Agent, without regard to Licensee. MarketGrader has no obligation to take the needs of (Licensee) or the owners of the Fund into consideration in determining, composing or calculating the MarketGrader India All-Cap Growth Leaders Index. MARKETGRADER SHALL NOT BE A PARTY TO THE TRANSACTION CONTEMPLATED HEREBY, AND IS NOT PROVIDING ANY ADVICE, RECOMMENDATION, REPRESENTATION OR WARRANTY REGARDING THE ADVISABILITY OF THIS TRANSACTION OR THE FUND OR THE ABILITY OF THE INDEX TO TRACK INVESTMENT PERFORMANCE. MARKETGRADER HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, REGARDING THIS TRANSACTION AND ANY USE OF THE INDEX, INCLUDING BUT NOT LIMITED TO ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR USE, AND NON-INFRINGEMENT AND ALL WARRANTIES ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING AND USAGE OF TRADE OR THEIR EQUIVALENTS UNDER THE LAWS OF ANY JURISDICTION. UNDER NO CIRCUMSTANCES AND UNDER NO THEORY OF LAW, TORT, CONTRACT, STRICT LIABILITY OR OTHERWISE, SHALL MARKETGRADER OR ANY OF ITS AFFILIATES BE LIABLE TO ANY PERSON FOR ANY DAMAGES, REGARDLESS OF WHETHER THEY ARE DIRECT, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY CHARACTER, INCLUDING DAMAGES FOR TRADING LOSSES OR LOST PROFITS, OR FOR ANY CLAIM OR DEMAND BY ANY THIRD PARTY, EVEN IF MARKETGRADER KNEW OR HAD REASON TO KNOW OF THE POSSIBILITY OF SUCH DAMAGES, CLAIM OR DEMAND.
MarketGrader India All-Cap Growth Leaders Index is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using MarketGrader India All-Cap Growth Leaders Index and/or its trademark or the Index Price at any time or in any other respect. MarketGrader India All-Cap Growth Leaders Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that MarketGrader India All-Cap Growth Leaders Index is calculated correctly. Irrespective of its obligations towards MarketGrader, Solactive AG has no obligation to point out errors in MarketGrader India All-Cap Growth Leaders Index to third parties including but not limited to investors and/or financial intermediaries of the financial instrument. Neither publication of MarketGrader India All-Cap Growth Leaders Index by Solactive AG nor the licensing of MarketGrader India All-Cap Growth Leaders Index or its trademark for the purpose of use in connection with the financial instrument constitutes a recommendation by Solactive AG to invest capital in said financial instrument nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in this financial instrument.
"MARKETGRADER" and “MarketGrader India All-Cap Growth Leaders Index ” are trademarks of MarketGrader.com Corp. and have been licensed for use for certain purposes by Van Eck Associates Corporation. based on the MarketGrader India All-Cap Growth Leaders Index , is not sponsored, endorsed, sold or promoted by MarketGrader, and MarketGrader makes no representation regarding the advisability of investing in such product(s). VanEck India Growth Leaders ETF (GLIN).
MarketGrader India All-Cap Growth Leaders Index is calculated and published by Solactive AG. MarketGrader India All-Cap Growth Leaders Index is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using MarketGrader India All-Cap Growth Leaders Index or its trademark or the Index Price at any time or in any other respect.
The S&P 500 Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Van Eck Associates Corporation. Copyright © 2023 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit https://www.spglobal.com/spdji/en/. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
© Van Eck Securities Corporation, Distributor, a wholly-owned subsidiary of Van Eck Associates Corporation.